The U.S. economy notched another sizable payroll gain in March as the labor market extended its strong and speedy recovery to bring employment closer to pre-pandemic levels.
The Labor Department released its March jobs report Friday at 8:30 a.m. ET. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg.
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Non-farm payrolls: +431,000 vs. +490,000 expected and an upwardly revised +750,000 in February
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Unemployment rate: 3.6%, vs. 3.7 expected, 3.8% in February
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Average hourly earnings, month-over-month: 0.4% vs. 0.4% expected and an upwardly revised 0.1% in February
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Average hourly earnings, year-over-year: 5.6% vs. 5.5% expected and an upwardly revised 5.6% in February
March’s closely-watched jobs report saw payrolls come in lower than expected but still marked a fifteenth consecutive month of expansion for the U.S. workforce. Economists surveyed by Bloomberg had anticipated payrolls to rise by 490,000, according to consensus data. At 678,000, February’s jobs report reflected a stunning upside upside surprise to investors, with payrolls rising 255,000 more than experts projected at the time. In Friday’s report, the prior month’s job gains were also upwardly revised even further to show 750,000 jobs added or created.
Bankrate senior economic analyst Mark Hamrick said it would be a challenge to match the 678,000 jobs added in February, but even so, the expectations were that payroll growth would be north of 400,000 jobs.
The past several months of data have reflected continued momentum in the labor market recovery even as an Omicron surge in cases of COVID-19 put a dent in demand for workers, particularly in the high-contact services sector. The unemployment rate fell to 3.8% in February to reach the lowest level since before the virus emerged and upended the U.S. economy. Notably, the improved unemployment rate came even as labor force participation unexpectedly rose to 62.3%. Consensus economists anticipate the unemployment rate will fall further to 3.7% in March.
“If a decline in the unemployment rate is seen, it would mark a new pandemic low,” Hamrick said. “How many more people came into the workforce will be part of the equation.”
JoAnne Feeney, Advisors Capital Management partner and portfolio manager, told Yahoo Finance Live that although any read in the upper 400,000 range will be viewed as positive, there are still too few people looking for jobs.
“The real thing we’re focused on is labor force participation. Do we get more workers coming back?” she said. “That is the biggest constraint right now on the economy continuing to grow, because there are just not enough people to take these jobs, so getting them to come back into the workforce I think is going to be the better signal regarding how much growth is ahead of us.”
Labor shortages have been a major challenge, not only for U.S. employers struggling to find enough labor to meet demand as millions of Americans remain on the sidelines of the workforce, but also for the Federal Reserve as it attempts to meet its primary economic goals of maximum employment and price stability.
This labor market tightness has strongly informed the central bank’s decision to rein in monetary policy, with economic strength suggesting to officials that the U.S. economy might weather less accommodative financial conditions.
“The Federal Reserve has a dual mandate to promote employment and stable prices,” Bankrate senior industry analyst Ted Rossman said in a note. “The strong labor market is leading the Fed to focus squarely on combating the high inflation rate. Fed Chair Jerome Powell recently hinted at a more aggressive pace of rate hikes, and this report fits that narrative since inflation is a much bigger concern than unemployment right now.”
Powell acknowledged in recent testimony before the House Financial Services Committee that while labor demand is strong, and labor participation has edged higher, the supply of workers remains subdued.
“As a result, employers are having difficulties filling job openings, an unprecedented number of workers are quitting to take new jobs, and wages are rising at their fastest pace in many years,” Powell said.
Although average hourly wage growth decelerated in February, wages have climbed to well above pre-pandemic trends and in turn, contributed to much of the inflationary pressures running hot across the U.S. economy.
Bank of America pointed out in a recent note that amid the labor market recovery is a higher level of job openings for any given unemployment rate than compared to prior history. As a result, the short-run inflation neutral unemployment rate (NAIRU) may be higher than longer-run estimates, implying more sustained wage and price pressures in the near-term, according to the bank.
Earlier this week, the Labor Department’s JOLTs (Job Openings and Labor Turnover Summary) showed vacancies totaled 11.266 million, retreating modestly from a record high but still far outpacing new hires.
“The pandemic labor market has seen an extraordinary outward shift in the Beveridge curve (the relationship between unemployment and the job vacancy rate), suggesting difficulty in matching workers to jobs,” BofA economists said in a recent note. “This mismatch may reflect surging goods spending and hence a shortage of workers in the hottest part of the economy.”
Friday’s unemployment figures, expected to build on this trend, come as policymakers appear to embrace the possibility that more aggressive interest rate hikes will be necessary, with multiple Fed officials in recent weeks — including Powell — suggesting a 50-basis point hike is on the table.
“The payroll jobs report might be the biggest one yet in this recovery from the pandemic,” FWDBONDS chief economist Christopher Rupkey said in a recent note. “Federal Reserve officials are already chomping at the bit for bigger 50 bps rate hikes at upcoming meetings, and the tightest labor market since the 1960s is like pouring gasoline on the fire where any policy official worth his or her salt is burning with desire to get interest rates up to 2% neutral levels now.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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